We talked last week about how shareholders are really the last people you’d want running a bank, if you’re the sort of person who doesn’t like banks. Conveniently Jesse Eisinger is that sort of person, and he’s pissed at shareholders for how they’re running banks:
Shareholders can’t be counted on.
That’s the message from the dispiriting shareholder vote on whether to leave Jamie Dimon as both the chief executive and the chairman of JPMorgan Chase, or to split the roles. Even more shareholders backed him in his dual role this year than did last year.
For some time, reformers have hoped that shareholders might ride to the rescue to solve the problem of Bank Gigantism, otherwise known as Too Big to Fail.
Big-bank critics, like the freethinking analyst Mike Mayo, analysts at Wells Fargo, and Sheila Bair, the former head of the Federal Deposit Insurance Corporation — and others, including me — have raised the possibility that shareholders might revolt over banks’ depressed stock valuations and seek breakups. Broken-up banks would be smaller and safer.
No, it’s not going to happen. Shareholders are part of the problem, not the solution.
The problem in this telling is basically the limited liability corporation, which gives shareholders an option on the corporation’s assets; option pricing theory, which informs shareholders that volatility – of earnings, of “high-risk, high-return bets” where shareholders “capture the unlimited upside and their losses are capped” – increases the value of their option; and modern corporate governance, which informs bankers that they work for the shareholders and therefore should be maximizing the value of that option. With the bets and so forth. Read more »
Attending Harvard, surrounded by classmates with trust funds and blue blood, who had no idea what it was like to grow up in the projects. His years with those same WASPs, many of whom had probably never met a Jew. The period in which there was a lot more Lloyd to love, which coincided with the ‘You can never be too rich or too thin’ era. All experiences that likely made Lloyd Blankfein acutely aware of the fact that he was different, and maybe made him feel like a little bit of an outsider.
None of them, however, can compare to the most ostracizing experience of his life: working as a young commodities trader in an investment bank. Some might say it was the equivalent of being gay in a world that is yet to fully accept homosexuality. Read more »
Lloyd Blankfein gained a beard and a few mill. Read more »
Recent public remarks by Blankfein that he will stay at his job “for awhile” stung both Cohn and [vice-chairman Michael] Evans, who would like him out sooner so they can have their chance at the top, these people add. Cohn recently told FOX Business he’s content in his current role, and Evans has kept a low profile in recent months as both Blankfein and Cohn have been reaching out to the press. The charm offensive is designed to reverse years of bad publicity concerning Goldman’s role in the 2008 financial crisis and charges that the firm had taken advantage of clients during this time. But Blankfein’s comments touched off even more jockeying between the two men to gain support among the firm’s powerful ranks of “partners”, or senior executives, to emerge as Blankfein’s eventual replacement, these people say. One person close to Goldman said Evans was particularly shaken by Blankfein’s statements, and as a result he might be considering his options outside the firm if Blankfein signals he will stay at the top indefinitely. [FBN, earlier]
“Could you imagine giving up all this? Of course not. The combination of this being who I am and what I do and having absolutely no other interests makes me think I want to be doing this for a while,” Blankfein, 58, told Stephanie Ruhle on Bloomberg Television today from the sidelines of Goldman Sachs’s technology conference in San Francisco. [Bloomberg]
[via Ryan McCarthy]
Presumably the new scruff is being sported simply in an effort to stay warm in Switzerland but dare we say it should become a permanent thing? As you can see here it does nothing to obscure The Lloyd Face and in fact enriches it somehow?
“At first I thought it was a friend of mine pulling a prank. I thought it was Lloyd Blankfein,” Jamie Dimon said yesterday in Germany, re: the time Tom Brady called to cheer him up about JPMorgan’s $6.2 billion trading loss. He didn’t elaborate but it’s pretty obvious that the day Goldman was sued over Abacus, Dimon called over to GS pretending to be Aretha Franklin, telling Lloyd “no one’s got any R-E-S-P-E-C-T for clever investment products,” while months after JPMorgan bought Bear Stears, JD received a call from someone claiming to be “Jimmy Cayne” calling from the lobby with a sample of 90210 kush that he insisted Dimon had to come down and try but “A-SAP, ’cause Big J had to double park his truck.” [Bloomberg]
The following employees successfully made it through the “vigorous cross-ruffing” process and were inducted into the partnership this morning, after receiving a congratulatory call from Lloyd and an extra special visit by Gary, wherein the chosen few got to stick their grundles in his face. Read more »
How can you not love listening to Lloyd Blankfein? He spoke at this Merrill conference this morning and here are the slides, whatever; he is not a PowerPoint presenter, he is a philosopher. Let’s talk Philosophy of Lloyd.1
Lloyd and I share a number of passions, I assert without evidence, but a quirky one is that we both enjoy idly speculating about conservation laws in finance. In the Q&A Lloyd was asked about the clearing of derivatives and their movement to central counterparties, in which instead of banks trading opaque over-the-counter products with each other and their clients directly, taking client and fellow-bank counterparty risks, derivatives will increasingly trade in standardized cleared form with public pricing and central clearinghouse credit risk. Lloyd began by hypothesizing a “physical law of conservation of risk,” noting that “the things you do to reduce the risk of a 20-year-storm” – like reducing credit exposure to a bunch of different shaky counterparties in derivatives markets – “might make worse the risk of a 50-year storm,” like the credit exposure to one central counterparty whose failure could bring everyone down. I’m with you Lloyd: endorsed; narrow the distribution and fatten the tails etc.
The other concern about the move to clearing is that lots of people expect standardization and clearing will reduce the spreads that banks can charge on cleared things (mostly interest-rate swaps, some miscellany). Coincidentally a while back I speculated about a sort of law of conservation of abstraction, in which the abstract fantasies of our global financial system are built on the mucky underpinnings of a basement at DTCC full of damp stock certificates. That was … that was dumb, I don’t know what I was thinking.2 It’s obviously false. It’s the other way around actually: the more the inputs of the financial services industry abstract away from human activity, the more the outputs can move even higher up the abstraction chain. You see this with DTCC itself, which was seeking efficiency by dematerializing stock certificates even before a hurricane did that job for it, or in that Journal article last week about how Belgium is dematerializing its stock certificates and everyone’s all sad about it but the march of progress waits for no paper-hoarding Belgian.
You can see it especially Lloyd’s take on whether increased clearing of interest-rate swaps, etc., will help or hurt Goldman Sachs’s business. Read more »
The phone call lasts just a few seconds. The words “congratulations, you’ve become a partner,” are just about all Lloyd Blankfein, the boss of Goldman Sachs, will have time to say to the 85 or so bank high-flyers he will ring next Wednesday to invite into one of the most prestigious and lucrative cliques on Wall Street…Those aspiring partners who pick up their phones next week and hear not Blankfein’s New York tones but, perhaps, the more familiar voice of their divisional boss on the end, will know their time has not come. Some will walk. But others, as Sherwood puts it, “will go back to their desk, and work hard” and try again in two years’ time. [Guardian, Earlier]
Already exhausted from a massive cleanup and nightmarish commutes to work, thousands of U.S. voters in storm-struck New York and New Jersey encountered confusion and long lines as they tried to cast ballots in a cliffhanger presidential election…Voting at the YMCA on West 63rd Street in Manhattan was delayed because election officials could not find the ballot cards and scanners were not working properly. Among those arriving to vote there was Lloyd Blankfein, the chief executive of investment banking powerhouse Goldman Sachs. He left before voting there began. [Reuters]